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Sunday, February 11, 2018

I am very late to this particular party, but back in November, the Second Circuit decided ARIAS v. GUTMAN, MINTZ, BAKER & SONNENFELDT LLP, an important FDCPA case dealing with a collector-law firm's attempt to collect funds that were exempt from collection. After the firm froze the money in the consumer's bank account, the consumer twice sent the collector documentation establishing that the funds were exempt, but the firm claimed he had not supplied adequate documentation. At a later hearing, a firm lawyer reviewed the documents the consumer had twice sent, agreed that they showed that the funds were exempt, and released the funds in the account. The Second Circuit held that the complaint stated a claim under both the FDCPA prohibitions on unfair and unconscionable conduct and misrepresentation, saying:

We hold that a debt collector engages in unfair or unconscionable litigation conduct in violation of section 1692f when, as alleged here, it in bad faith unduly prolongs legal proceedings or requires a consumer to appear at an unnecessary hearing.

One comment: a while ago, I wrote an article, Towards a New Model of Consumer Protection: The Problem of Inflated Transaction Costs, 47 William & Mary Law Review 1635 (2006), arguing that one way companies take advantage of consumers is by making it expensive for consumers to assert their rights. Arias provides an example of a company doing just that, and getting in trouble because of it. A recurring phenomenon in debt collection cases is that consumers don't show up to court hearings on their claims. Collectors claim that's because the consumers owe the money and so know they will lose; consumer advocates argue it's because consumers can't afford to take a day off from work. Whatever the merits of such claims, the firm should have accepted the consumer's documentation in Arias the first time the consumer submitted it and has paid a price for not doing so. But probably many consumers in Arias's position would not have attended the hearing, and would have lost. In other words, I suspect that many collectors in the firm's position would have won this case they should have lost simply by increasing the consumer's cost by forcing the consumer to choose between attending an unnecessary hearing or taking a day off from work. I hope now they will think twice before doing so.

Wednesday, January 03, 2018

Here, by Sophia Morris. Among the cases is the possible return of Spokeo to SCOTUS. Standing is also an issue in another case mentioned in the report, but in the second case the issue arises in connection with a data breach.

Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!

Here's an excerpt from the story:

The attorney for Leandra English — the bureau’s deputy director who has said she is the rightful acting head — said Trump’s tweet showed he was trying to exercise improper influence over the independent consumer watchdog.

“I think that [tweet] shows you this isn’t just some hypothetical concern,” the attorney, Deepak Gupta, told Judge Timothy J. Kelly of the U.S. District Court for the District of Columbia during a nearly two-hour hearing.

* * *

Gupta argued Friday that English was suffering irreparable harm by not being acting director and that harm also extended to Americans because Mulvaney is taking a different approach to consumer protection than she would have.

“You cannot unscramble the egg of having the wrong person running the Consumer Financial Protection Bureau,” Gupta told Kelly. “This is not a garden-variety employment case.”

Gupta said that Congress established the succession provision in Dodd-Frank to ensure that the bureau would not be subject to presidential influence. Mulvaney should be removed as acting director because he also serves in the White House at the pleasure of the president, Gupta said.

Thursday, December 21, 2017

The American Banker''s Kate Berry has a report on the hearing here; it is not optimistic about English's chances. Meanwhile, the WSJ has a story headlined The Internal Divide Behind Trump’s Takeover of Consumer Watchdog about how White House conservatives want to dismantle the Bureau while the Treasury sees a role for the Bureau. Mulvaney's appointment is seen as a victory for those who oppose the Bureau.

Thursday, August 24, 2017

Before jumping into my first post, I wanted to quickly introduce myself. I'm Mike Landis, Litigation Director for U.S. PIRG. (Obligatory disclaimer: my posts express my individual views only and not those of U.S. PIRG.) I've been a reader of this blog for sometime, and I'm excited to now participate as a contributor. My goal is to add to the great updates, analysis, and insight on consumer law and policy that this blog is known for. You can follow me on Twitter at @MLandisPIRG. On to the post...

Recently, a Ninth Circuit panel affirmed the district court's order approving a cy pres-only settlement in In re Google Referrer Header Privacy Litigation, 15-15858. (The panel's opinion is available here.) Under the terms of the settlement, Google is to pay a total of $8.5 million. Of that amount, $3.2 million will go to attorney fees, administration costs, and incentive payments to the named plaintiffs. The remaining $5.3 million will be split between six nonprofits that work on internet privacy issues: AARP, Inc., the Berkman Center for Internet and Society at Harvard University, Carnegie Mellon University, the Illinois Institute of Technology Chicago-Kent College of Law Center for Information, Society and Policy, the Stanford Center for Internet and Society, and the World Privacy Forum.

First, the panel unanimously rejected the objectors' request that the appellate court "impose a mechanism that would permit a miniscule portion of the class to receive direct payments." According to the panel, the objectors had suggested that the court could "compensate an oversized class with a small settlement fund by random lottery distribution" or by offering "$5 to $10 per claimant" on the assumption that few class members will make claims. The panel "quickly disposed" of this argument by stating that appellate review is "not predicated simply on whether there may be 'possible' alternatives." Rather, the appellate court simply makes sure that the settlement approved by the district court is "fair, adequate, and free from collusion." The panel also "easily reject[ed]" the objectors' argument that, if the settlement fund is non-distributable, then a class action cannot be the superior means of adjudicating the dispute under Rule 23(b)(3). The panel said that "[t]he two concepts are not mutually exclusive" and, in fact, a class action makes most sense where "recovery on an individual basis would be dwarfed by the cost of litigating on an individual basis."

Perhaps the most interesting part of the opinion, and where the panel split 2-1, was with regard to the cy pres recipients themselves.

Of the 118 cases initiated in 2012, 102 (or nearly 90 percent) had reached a final resolution by May 1, 2017, the date on which our study closed. Twenty-three of those cases (or nearly 20 percent of the resolved cases) were ended by a class action settlement.

Nine of the 23 class action settlements provided either a fund that did not revert to the defendant or an automatic payment to class members, distributing to class members more than $12 million.

One 2012 case resulted in a nationwide recall of a defective coffee maker, together with compensation for consumers who had already replaced the product, while another resulted in a four-year extension of a product warranty.

With one important exception, the remaining cases resulted in “claims-made” settlements that provided consumers with the opportunity to file a claim for monetary compensation. * * *

* * *

The only settlement that truly did not provide any benefit to the class members (not a single class member made a claim), was not approved by the court, demonstrating judges are in the best position to make sure attorneys do not benefit from settlements that fail to benefit class members.

Large companies and debt collectors frequently file unmeritorious claims against consumers. Recent high-profile actions brought by the Consumer Financial Protection Bureau (CFPB) against JP Morgan, Citibank, and large debt collectors illustrate the breadth and importance of this phenomenon. Due to the limited financial power of individuals, consumers often do not defend against such baseless claims, which results in the entry of millions of default judgments every year. To combat this problem, policymakers and scholars have explored a variety of solutions that would make it easier for consumers to defend in court, but these prove ineffectual.

To solve the problem of unmeritorious claiming, this Article proposes a budget-neutral solution called “Adminization.” This novel approach uses an administrative agency, potentially the CFPB, as a gatekeeper to civil litigation which detects and sanctions the filing of baseless claims. The main task of the agency is to select a sample of cases, audit them, and—where needed—issue fines. To effectively focus the agency’s attention, the sampling of cases for audit could rely on machine-learning algorithms—the same ones used by credit card companies to monitor fraud today. The audit will use agency investigators to gather and corroborate information relevant to the debt claim, and where wrongdoing is found, the agency will use its powers to levy fines against abusive plaintiffs. Unlike the current system, Adminization will subject every plaintiff to the risk of thorough investigation and large fines, thus undercutting the financial incentive to engage in wrongful behavior. The importance of Adminization lies in its cost-effectiveness, practicality, and political feasibility relative to “participation-based” approaches that dominate the discussion today.

Wednesday, July 26, 2017

Then take a look at the Consumer Bureau Action Tracker created by Allied Progress. For example, the CFPB has brought 95 enforcement actions affecting Texas, home state of CFPB critic and House Financial Services Chair Jeb Hensarling. Or if you want to know how many debt collection enforcement actions the Bureau has brought, the answer is thirteen. You can also search by various other criteria.

Tuesday, July 18, 2017

On July 17, a panel of the Ninth Circuit issued a revised opinion in Bruton v. Gerber Products. (I’ve attached the withdrawn opinion here and the new opinion here.) In her lawsuit, Natalia Bruton alleged that “labels on certain Gerber baby food products included claims about nutrient and sugar content that were impermissible under Food and Drug Administration (FDA) regulations incorporated into California law.” Among other claims, Bruton alleged that for Gerber to make a claim that its competitors did not make was likely to trick consumers into believing that Gerber’s products were better than its competitors.

The July 17 opinion held to most of the holdings in the April 19 opinion, but did change on this one claim. The panel held that Bruton had failed to meet her summary judgment burden as to this one claim.

The withdrawn opinion commented that the claim was ”unusual.” I’ve got to agree. I’ve not seen it used in other cases. But that doesn’t mean that it’s not a valid claim.

As the new opinion noted, “Bruton's theory of deception may be viable. The California courts have held that even technically correct labels can be misleading.” Here, the panel determined that Bruton had failed to meet her burden of demonstrating a genuine issue of material fact. Without studying the entire record of the summary judgment at the district court, it’s impossible to comment on this point.

However, what matters more for consumers is that the new opinion repeats three broad holdings in the withdrawn opinion: (1) affirming (contrary to courts in other circuits) that a claim of unjust enrichment can be a standalone claim, (2) refusing to follow the Third Circuit’s creation of a new ascertainability standard in Bayer v. Carrera (the subject of many posts, including this one), and (3) reminding companies that the unlawful prong of the California UCL does not require proof that consumers are likely to be deceived.

None of these three holdings creates new law, but each is important jurisprudence. The first two holdings address (and reject) defense claims that regularly arise in California consumer cases generally, and food cases in particular. The third holding echoes an earlier decision of the Ninth Circuit that “the legislature’s decision to prohibit a particular misleading advertising practice is evidence that the legislature has deemed that the practice constitutes a ‘material’ misrepresentation, and courts must defer to that determination.” Hinojos v. Kohl's Corp., 718 F.3d 1098, 1107 (9th Cir. 2013).

Overall, a good day for consumers and a pretty good day even for Bruton.